Offering only cash and credit payment options is no longer enough. Today’s consumer demands affordable, flexible payment alternatives, and retailers, service providers and businesses of all types are expected to deliver. Consumer financing is the solution.
The transaction value of Buy Now, Pay Later (BNPL) services in the U.S. is estimated to jump from $316 billion in 2023 to $442.6 billion by 2027. Many factors contribute to the massive growth of consumer financing adoption:
- BNPL expansion across industries
- Digital-first innovations in consumer financing
- Generational shifts in consumer buying preferences
- The rapid expansion of e-commerce and omnichannel retail
- Economic pressures affecting consumer spending habits
Financing has become an expectation, not a nice-to-have feature of retailers, home improvement providers and – well, any business! Companies seeking a competitive edge must understand the rise of consumer financing, the major factors driving the trend, and how to successfully implement a financing program of their own.
Factor 1: The Ease, Efficiency, and Expansion of Consumer Financing
The Buy Now, Pay Later model has transformed how consumers think about payment, especially for high-value items or services. Unlike credit cards, loans, or cash payments, BNPL solutions offer quick approval, predictable installment payments, and a frictionless checkout experience. The many benefits of consumer financing over traditional payment methods have accelerated adoption across industries, from home improvement businesses (including HVAC, plumbing, and roofing contractors) to jewelry stores to elective medical practices and many others in between.
Here’s a breakdown of traditional payment options and where they fall short for both consumers and businesses:
- Traditional credit cards allow consumers to make purchases on their timelines. However, credit card charges often come with high monthly payments, astronomical interest rates, and a revolving credit structure that can add hundreds of dollars in fees to the total cost of the product or service.
- Securing a bank loan is another option, but this route is typically more challenging for shoppers with less-than-ideal credit. And because banks have a longer turnaround time for loan approvals, customers often must postpone their purchase.
- A lump sum cash payment allows for immediate purchase, but at the cost of the consumer’s savings account. When a purchase or project costs thousands of dollars, paying in cash becomes less realistic, especially for consumers who rely on the majority of their paychecks to cover monthly bills. For most individuals, cash payments for big-ticket items simply aren’t possible.
Consumer financing is an alternative to these payment options that offers a more accessible, more affordable, and faster path to purchase. In recent years, consumer financing has expanded to virtually every industry, providing the affordability and accessibility that increase sales.
By partnering with a trusted consumer financing firm like United Consumer Financial Services, you provide consumers with affordable payment options tailored to their needs and wants. Merchants must understand that shoppers have come to expect affordable, flexible payment options and meet their needs with a streamlined process that delivers a positive customer experience.
Factor 2: Digital-First Innovation in Consumer Financing
The rise of a mobile-first approach to payments has completely redefined how consumer financing works. Traditional banks and credit providers have historically relied on lengthy applications and rigid, time-consuming approval processes. Modern financing companies, like United Consumer Financial Services, have embraced digital-first platforms that make financing faster, more flexible, and more accessible.
The key aspects of a mobile-first financing program from UCFS include:
- Mobile Application and Approval: Your customers can apply for financing from their phones, tablets, or computers. There’s no need to send off an application and then wait hours, days, or more for a credit decision. UCFS returns a notice in just minutes so that you can proceed with the sale.
- User-Friendly Digital Platforms: UCFS’s mobile-first experiences and clear repayment terms make financing less intimidating and more appealing to younger consumers who value speed and transparency.
- Greater Accessibility and Sales: Retailers adopting mobile-first financing see higher conversion rates, increased average order values, and improved customer loyalty, since flexible payments remove a significant barrier to purchase.
Mimicking consumer shopping behaviors and preferences, fintech innovation and a mobile-first approach have turned consumer financing from a clunky, paperwork-heavy process into a frictionless experience that benefits both consumers and businesses.
Factor 3: Generational Payment Preferences that Boost Consumer Financing Adoption
A major driver of the rise of consumer financing is the generational credit shift. Consumer financing makes big-ticket purchases more affordable and accessible for all demographics, but younger shoppers are especially vocal about their demand for payment flexibility.
Younger generations are more resistant to relying on credit cards and incurring the associated revolving debt. They prefer platforms that are transparent about fees and integrate financing seamlessly into digital shopping experiences, expecting financing services to be mobile-first, intuitive, and quick.
This generational shift is significant because Millennials and Gen Z now represent the largest share of consumers in the marketplace. As their purchasing power grows, so does their influence on how financing products are designed and delivered. Businesses that rely solely on traditional credit offerings risk alienating these younger demographics, who increasingly demand flexibility, control, and digital-first solutions.
Factor 4: E-Commerce Growth Demands Accessible Consumer Financing
The rapid expansion of e-commerce and omnichannel selling has been one of the most powerful accelerators of consumer financing. As more shopping shifts online, financing is no longer optional; it’s becoming a critical differentiator in the customer experience.
How e-commerce fuels financing adoption:
- Seamless Checkout Integration: E-commerce shops can offer installment options directly at checkout, delivering flexible payment choices at a key moment in the buyer’s journey. This reduces cart abandonment and drives higher conversion rates.
- Higher Average Order Values: Financing empowers consumers to spend more per transaction without feeling the full financial burden upfront, making financing an engine for revenue growth in e-commerce.
- Omnichannel Consistency: By investing in online platforms, brick-and-mortar retailers, and businesses of all types can offer financing in-store and online, creating a unified shopping experience that meets consumer expectations.
Financing solutions not only help businesses stand out in crowded digital marketplaces, but they also foster customer loyalty and increase retention.
Factor 5: Financial Pressures and Budget Constraints Increase BNPL Adoption
Macroeconomic pressures and broader financial trends play a pivotal role in the rise of consumer financing. Consumers today are facing rising living costs, inflation, and stagnant wages, which affect their purchasing power and create a greater need for flexible payment solutions. Many consumers are seeking flexible ways to manage cash flow, making consumer financing for big-ticket purchases an attractive alternative.
Below are four key ways economic pressures drive consumer financing adoption:
- Affording Everyday Expenses: As the cost of essentials like groceries, housing, and healthcare increases, consumers turn to installment plans to spread payments over time without incurring high-interest debt.
- Credit Access Challenges: In periods of economic uncertainty, traditional lenders often become more selective, making it harder for consumers to access credit. Flexible consumer financing solutions like those from UCFS fill this gap, offering accessible alternatives.
- Maintaining Lifestyle and Spending Habits: Financing allows consumers to maintain discretionary spending even during economic slowdowns, helping any type of business selling products or services with a higher price tag to sustain revenue and maintain cash flow.
- Shift in Consumer Priorities: Economic uncertainty has accelerated the move toward predictable, transparent, and lower-risk financing options, making them more attractive than revolving credit or high-interest loans.
Consumer financing helps maintain affordability even in a fragile economic climate, making it a necessary tool for businesses that want to compete in the marketplace.
Conclusion
Offering consumer financing is no longer optional; it’s a key driver in modern commerce. Business sellingproducts and services both – in virtually every sector must adapt to consumer expectations for an affordable, accessible, predictable financing experience .
For more than 45 years, United Consumer Financial Services has been providing consumer financing solutions to our clients. A Marmon company, a division of Berkshire Hathaway, we have spent decades learning and evolving with the market to develop financing programs built for businesses just like yours. Contact UCFS today to learn more about how offering consumer financing can position your company to better serve customers, increase sales, and grow –– starting today.
